INDIA Law and Practice Contributed by: Aditya Jalan, Urvashi Misra, Bhagya K. Yadav and Sushrut Garg, AZB & Partners
ciliation under the Arbitration Act has settlements enforceable like arbitral awards. Mediation, earlier operating through Section 89 of CPC as a court-annexed or voluntary process, has now been comprehensively dealt with under the Medi- ation Act. Under Section 89 CPC, judicial settlement refers dis- putes to a forum treated as a Lok Adalat under the Legal Services Authorities Act, 1987. 4.2 Requirements to Engage in ADR The formal framework for ADR is anchored in Section 89 of the CPC, which requires referring parties to ADR mechanisms such as arbitration, conciliation, media- tion, or Lok Adalat. A key mandatory requirement exists under Section 12A of the Commercial Courts Act, which requires pre-institution mediation for commercial disputes (unless urgent interim relief is sought). 4.3 Impact of ADR In India, ADR mechanisms particularly mediation and arbitration primarily complement and streamline court proceedings, by encouraging early settlement of dis- putes. As per the Section 77 of the Arbitration Act, if a party is in the middle of formal conciliation proceedings, it is barred from starting any arbitral or judicial proceed- ings regarding the same dispute. 4.4 Timing of ADR ADR typically arises at both the pre-institution stage and the post-institution stage. As indicated above, for commercial disputes, Section 12A of the Commercial Courts Act mandates pre-institution mediation (unless urgent interim relief is sought), making ADR a thresh- old requirement before filing a suit. After a suit is filed, courts may refer parties to ADR under Section 89 of the CPC at various stages of proceedings. As regards limitation, the general rule under Sec- tion 9 of the Limitation Act is that time, once begun, does not stop; however, specific ADR statutes create exceptions.
Notably, Section 12A(3) proviso of the Commer- cial Courts Act and Section 29 of the Mediation Act expressly provide that the period spent in mediation is excluded for limitation purposes, thereby protecting parties from being time-barred. Similarly, in arbitration, limitation is preserved from the date of notice invoking arbitration under Section 21 of the Arbitration Act. The Supreme Court in Hari Shankar Singhania and Ors v Gaur Hari Singh (2006) 4 SCC 658 held that limitation under Article 137 of the Schedule to the Limitation Act begins only when negotiations break down into a dispute, marked by clear denial or repudiation; while genuine negotiations continue, limitation does not run. 4.5 Confidentiality Section 42A of the Arbitration Act provides for confi- dentiality. The aspect of confidentiality in conciliation proceedings is also governed by Section 75 of the Arbitration Act. The Mediation Act, mandates that the mediator, par- ties, mediation service providers, and all participants must keep all mediation-related communications strictly confidential. 4.6 Costs Section 31A of the Arbitration Act provides for grant of costs in arbitrations. Conciliation under the Arbitra- tion Act reflects its non-adversarial nature by adopting equal sharing of costs as the default rule, unless the parties agree otherwise, with the conciliator empow- ered to determine and fix the costs and fees. Similarly, mediation especially under the Mediation Act empha- sises flexibility and party autonomy in cost arrange- ments. Proceedings before Lok Adalat under the Legal Services Authorities Act, 1987 remain largely cost-free to promote access to justice. 4.7 Courts and ADR In India, courts have consistently adopted a pro-ADR approach, encouraging dispute resolution outside court driven litigation. ADR is treated as a preferred and integral part of the dispute resolution system rather than an exception.
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